Is this possible with a CNC machine?

It would be possible but a 10,000 - 20,000 rpm router is much too fast for sanding and polishing. A much slower speed motor should work. A flexible sanding pad on the motor shaft might work better than a rigid pad. I don't think it would be a difficult conversion to try out your idea if you already have a cnc wood router machine.

CarveOne

I was thinking along these lines a week or so ago.

I haven't tried this, but I was thinking just use a stationary holder for a flexible sanding block. Then have your machine go back and forth over the piece to be sanded a few times.

One problem would be a loaded up sanding block, though. If you have to keep stopping the program to change out the sanding block, are you really saving yourself any trouble versus sanding by hand?

Also, unless you plan on only machining very straight-grained woods, you'd want to use a pretty fine-grit sanding block, in order to avoid leaving sanding marks. However, that will exacerbate the problem of having to change out the sanding block, as finer grit sandpapers have a tendency to fill up faster, in my experience.

Try it out and post the results!

I did this about a week ago to polish the alum, top of my cnc. I bought a polish pad for a diegrinder and a box of pads. I ran it at 10,000 RPM at a feed of 200in/min worked so well im looking at adapting this other projects.

I'm thinking that a round neoprene sanding disk with integral 1/4" shank for hand drills might work. If the disk can use hook and loop backed sanding disks with the holes in it the loading up problem may not be so bad. An air tool mounted on the z axis may be too noisy but an ac powered hand drill could work. For continuous duty production sanding a better motor solution is needed,

CarveOne